Sterling Market Commentary for Wednesday April 4th, 2012

A Look at Tuesday’s Market:  The overall market moved moderately lower in a relatively broad based move that saw the majority of the sector indices I track move lower on the day as well.  The weakest sectors were the the Gold/Silver,  Commodities,  High Tech, Oil & Gas, Cyclicals, Insurance,  Broker/Dealers, Natural Gas, Consumer, Oil Services, Telecom, and Pharmaceuticals.  There was strength in the Airlines,  Biotech, Retailers, Transports, and Healthcare related.  In the commodities markets, Oil was lower by $1.22 to $104.01 per barrel, and Gold was lower by $7.70 to $1,672.0 per ounce.  In the grain the market, Wheat was lower by $0.026 to $6.662 per bushel, and Corn was higher by $0.032 to $6.582 per bushel, and Soybeans were lower by $0.042 to $14.140 per bushel.

A Few Thoughts on Wednesday’s Market: After looking at the charts from Tuesday’s trading activity, it is somewhat surprising the turnaround.  Despite the moderate move lower in yesterday’s market,  the vast majority of the heavy volume stocks I looked at showed negative chart patterns.  I attribute this to two primary factors.  The 1st being the statements from the Fed that there will probably not be any additional quantitative easing, and the second being that the call for Apple to move to $1,001 per share, said that a big portion of the increase in value in Apple would come from market share gains at the expense of its competitors.  Not good to be those guys, and as a result, Apple went higher,  while many of the high tech indices went lower.

Interest rates also moved sharply higher on the day.  I think we are beginning to see the end to the great bull run of the bond market.  There will come a point when even the Fed can’t manipulate interest rates any more.

Twitter Model Portfolio Tweet Policy:  Currently Sterling Investment Services is managing a trading strategy based upon covered puts and calls.  Sterling Investments is currently running a “Model Portfolio” that is based upon this strategy.  It should be noted, that at this point in time, Sterling Investment Services is only “paper trading” this model portfolio, and not actually executing trades and creating actual positions within this model portfolio.  Therefore, please do not look for actual volume associated with our options selections.  It is Sterling Investment Services goal to initiate trading in an actual account based upon our model portfolio in the near future.  When that change actually occurs, Sterling Investments will notify its readers via Twitter and our website.

Yesterday’s Trade Selection:  On Tuesday we were looking at a covered call position on Textron.  We ended up long Textron ‘TXT’ @ $28.86 per share, and sold the April $28 calls at $1.43 per contract.  This should result in a profit of approximately $0.57 per share or annualized return of approximately 42.% by options expiration.